Is the debt-to-equity swap agreement valid?

In Zhang's case, a building materials company supplied steel to a real estate development company, and the real estate development company owed the building materials company 580,000 yuan. After repeated reminders, the building materials company failed, and the two sides reached an agreement through consultation. According to the agreement, the creditor's right of 580,000 yuan of building materials company was converted into the equity of real estate development company held by building materials company. After the conclusion of the agreement, before the industrial and commercial change registration, the building materials company thought that the agreement was unfavorable to it and asked the real estate development company to pay 580,000 yuan for the goods, but failed, so it appealed to the court to ask the real estate development company to pay the goods immediately. The focus of the dispute in this case is how to determine the legal effect of the debt-to-equity swap agreement reached by both parties. In this regard, three different views were formed in the trial. The first view is that the debt-to-equity swap agreement signed by both parties is essentially based on creditor's rights, but China's company law does not allow creditor's rights to be used as the company's capital contribution form, and neither party has gone through the formalities of industrial and commercial change registration, so the debt-to-equity swap agreement should be deemed invalid. The second point of view is that the debt-to-equity swap agreement signed by both parties is essentially a debt-to-equity swap, which is not illegal, and the intentions of both parties are true. The agreement should be considered valid and the relevant industrial and commercial change registration procedures can be completed. The third view is that the establishment of the debt-to-equity swap agreement determined by both parties will inevitably involve the company changes in equity, and the agreement will take effect after the industrial and commercial change registration. Comments on the debt-to-equity swap agreement include two forms. One is to offset the creditor's rights with equity, and the real estate development company transfers the existing equity to the building materials company, and the creditor's rights are eliminated. The other is that the creditor's rights of building materials companies are converted into investments in real estate development companies, thus increasing the registered capital of real estate development companies. The first form only changes the equity and shareholders, and does not change the total share capital of the company. As long as its operation conforms to the provisions of the Company Law on equity transfer, the debt-to-equity swap agreement reached by it is deemed to be valid. The second form belongs to increasing capital and shares, that is, converting a creditor's right into a new investment in the debtor, thereby increasing the registered capital of the debtor. China's "Company Law" stipulates that shareholders can make contributions in cash or in kind, industrial property rights, non-patented technology and land use rights. However, it is not clear whether the creditor's right can be used as capital contribution. However, in view of the fact that our country's laws do not prohibit creditor's rights as a form of capital contribution, and from the perspective of national legislation, countries also have different provisions on this issue. Therefore, this debt-to-equity swap agreement for the purpose of increasing capital and shares should not be deemed invalid on the grounds of violating the mandatory provisions of laws and administrative regulations. To sum up, no matter whether the form of debt-to-equity swap is debt-to-equity swap or capital increase and share expansion, as long as the debt-to-equity swap agreement concluded by both the creditor and the debtor is the true intention of the parties and does not violate the prohibitive provisions of the law, it should be deemed as valid. As for whether or not to apply for industrial and commercial change registration, it is not an effective requirement of the equity transfer contract, and the court should not consider the equity transfer invalid on the grounds that the parties have not gone through the change registration procedures. Can be ordered to complete the relevant industrial and commercial change registration procedures within a certain period of time. Therefore, the debt-to-equity swap agreement in this case is valid, and the parties concerned should go to the company registration authority for industrial and commercial change registration. As a result, the creditor's rights of building materials companies have been eliminated, and they have become the shareholders of real estate development companies, and obtained the corresponding rights and obligations of shareholders.